Corona Shutdown: Scenario Estimates Suggest Massive Effects on Austrian Tourism

The Austrian tourism industry is confronted with sharply declining revenues both due to the massive restrictions on the supply side (official closures of accommodation facilities, first in Tyrol, Salzburg and Vorarlberg, then throughout Austria; closure of cableways, leisure facilities, catering and commercial operations, etc.) and the collapse of domestic and foreign demand (due to restrictions on freedom of movement, border closures, bans on events, etc.) Tourism is thus one of the economic sectors that is suffering most from the current corona crisis.

The extent of these losses depends not only on when the above-mentioned restrictions are lifted, but also on how quickly demand will recover. The following factors play an important role in the recovery phase:

• Decreasing time resources of potential Austrian guests play a role: during the crisis, employees are often required to reduce holiday entitlements and time credits; after the crisis, self-employed workers must compensate for the losses they suffer due to the interruption of their business activities. The time budget available for holidays after the crisis is thus considerably reduced.

• The economic damage caused by the pandemic will lead to a reduction in disposable income, due to unemployment and short-time work for employees and massive losses in income for the self-employed. This will reduce the financial resources available for holiday travel.

• People will be able to travel again only after their freedom of movement is guaranteed, i.e. if border closures are lifted again.

• The personal sense of security must also be restored, i.e. the fear of possible infection must be overcome before the demand for travel can recover.

In addition to holiday travel, business travel, including visits to congresses, is also affected by the crisis. However, while it can be assumed that the "desire to travel" among holidaymakers will in principle be sustained, at least in the long term, and that consequently the demand for holiday travel, which has developed very dynamically in the past, will recover in the medium term, growth in business travel could remain at lower levels for much longer. The experience currently gained with video conferences and the corresponding technologies could cause companies, but also scientific institutions, to question the necessity of travel and conference participation more strongly and thus to rely more often on (cheaper) virtual rather than (more expensive) personal contacts.

It is currently impossible to make forecasts about the development of the Austrian tourism industry in 2020 in view of the uncertainties about the duration of all restrictions at home and in the most important countries of origin of Austria's guests and about the influence of the above-mentioned factors on the demand for travel. As an alternative, WIFO has drawn up scenarios that allow an estimate of the dimension of the expected overnight stay losses. These scenarios assume that the accommodation establishments will not be allowed to reopen until the beginning of summer, that demand will recover over the months of July and August and that, from September 2020, the level of overnight stays will be close to that of the previous year. The recovery is initially driven by domestic tourism (scenario 1), which seems plausible for several reasons:

• From today's perspective, numerous foreign destinations popular with Austrian guests, especially those in Italy and Spain, have been hit harder by the crisis than domestic destinations.

• Concerns about a possible infection with the coronavirus as well as insufficient medical care abroad will also lead many Austrians to prefer domestic destinations.

• Due to limited time resources, it is to be expected that destinations close to the place of residence will be chosen for shorter holiday stays.

However, these arguments not only speak in favour of an early revival of domestic tourism, but also for the chance to win (back) guests from traditional and nearby source markets for Austrian holidays. For this reason, it was further estimated (scenario 2) what effects (apart from growing domestic demand) could result from a revival of demand from the German market. It is assumed that both markets could partially compensate for the losses from other European source markets and the long-haul markets (which do not return to and remain at previous year's level overnight stays until October and November respectively).

The three versions of scenario 2 are similar to those of scenario 1 in terms of domestic overnight stays, but additionally assume a recovery in demand on the German market, although this is assumed to be only half as strong as that of domestic demand.

The results based on these scenario, which already include actual overnight stays for January and February 2020, show that growth in domestic demand and overnight stays in Germany in the second half of 2020 will help the tourism industry to compensate somewhat for the losses caused by the crisis, but that the overall loss of overnight stays will still be very high over the whole of 2020: the declines range from 31 percent (moderate revival of domestic tourism from September, overnight stay levels in July 2020 down by a quarter year-on-year) to around 24 percent in the most optimistic scenario, in which domestic demand in the third quarter is 9.5 percent and in the fourth quarter 17.5 percent higher than in the previous year, and that of Germany by 2 percent (third quarter) and 0.9 percent (fourth quarter).

In addition, it is expected that the losses in terms of revenues of the accommodation establishments will be larger than the decline in the volume of overnight stays: accommodation establishments will reduce prices in order to attract guests, especially in summer 2020, but this will be accompanied by a lack of demand from guests from long-distance markets, who on average spend more than domestic travellers and those of European source markets. The decline in overnight stays in the western regions in December 2020 assumed here also plays a role here, as expenditure in the winter season is on average higher than in the summer season.

The scenarios thus confirm the massive impact that the current crisis may have on the tourism industry, although the assumptions made regarding the development of demand from July 2020 onwards do not in any way reflect the "worst case". There is great uncertainty above all about the further development of the pandemic but also about the economy in those countries that are of great importance to the Austrian tourism industry as source markets.